Bundesbank's Dombret calls for closure of weak banks - magazine
FRANKFURT (Reuters) - Banks that failed the recent European health checks and are unable to raise the required funds in time should be closed down, Bundesbank board member Andreas Dombret told German magazine Focus in an interview.
The European Central Bank's landmark review of the euro zone's 130 largest banks concluded late last month with 13 banks failing with a combined 9.5-billion euro capital hole.
While the guidelines imply that banks which cannot cover their capital shortfall within a given time frame will be wound up, it remains to be seen whether governments will let it happen.
Dombret's comments are among the strongest calls to allow failures.
"Banks with capital shortfalls have nine months to fill the gap. Otherwise they will be wound up and that is the right way. The possibility to fail is a key element of the market economy," Dombret told German magazine Focus in an interview.
It could not be that parts of the economy were excluded from failing, while others were not, said Dombret, who is in charge of banking supervision on the Bundesbank board.
There was no German bank among the 13 banks that failed the tests. Only one, mortgage bank Muenchener Hyp [MNCHY.UL], fell short of capital as of the end-2013 cut-off date, but has since raised sufficient funds to close its capital gap.
In the long-term, consolidation would be a way to address overcapacity in the European banking sector, Dombret said.
"I definitely see overcapacity in the European banking sector. Consolidation is certainly a way to take capacity out of the market. Mergers and bank takeovers should at least not be a taboo," Dombret was quoted as saying by Focus magazine.
(Reporting by Eva Taylor; Editing by Michael Urquhart)
